US Airways halts merger talks with United

By Chavon Sutton, staff reporterApril 23, 2010: 3:36 AM ET

NEW YORK (CNNMoney.com) -- US Airways announced Thursday that it has discontinued merger talks with United Airlines.

The Phoenix-based US Airways (LCC, Fortune 500) halted talks after months of speculation about a potential merger with UAL Corporation (UAUA, Fortune 500), the fourth largest U.S. carrier and the parent of United Airlines.

"US Airways has long been a proponent for consolidation in our industry," US Airways chief executive Doug Parker said in a statement.

"We have recently held discussions with United Airlines regarding a possible combination between our two airlines. After an extensive review and careful consideration, our Board of Directors has decided to discontinue those discussions," he later added.

Reports about combining the two companies have been around for years. But merger talks heated up again after 2008's Delta Air Lines (DAL, Fortune 500)-Northwest Airlines combination.

Airline analysts have said that the recession-battered industry is crowded with carriers, and needs to consolidate.

In 2009 alone, the number of domestic and international passengers on U.S. airlines fell 5.3%, according to the U.S. Bureau of Statistics. And the recent volcano eruption in Iceland added insult to injury, grounding commercial flights and costing airlines tens of millions of dollars a day.

Though the company had earlier declined to comment on rumors of a potential merger, it said in a statement that Thursday's announcement was "appropriate to clarify the status of those negotiations."

Still, the company hinted to the possibility of a merger in the future. "It remains our belief that consolidation makes sense in an industry as fragmented as ours," said Parker.

"Whether we participate or not, consolidation that leads to a more efficient industry better able to withstand economic volatility, global competition, and the cyclical nature of our industry is a positive one," he said.

The merger would have created the second largest airline in the U.S., behind Delta.